Bruce Eichner is back. Why that might be a concern

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This Week in Crain's New York: February 23, 2015

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The last time the real estate market was at such a high point, developer Bruce Eichner was on his way to one of his biggest busts, defaulting on the $3.9 billion Cosmopolitan Resort and Casino in Las Vegas in 2008, just as the economy was beginning to tank.

That was not the first occasion when Mr. Eichner's timing on a megaproject collided with a wider real estate downturn. He handed back to his lenders two Manhattan towers, CitySpire Center and 1540 Broadway, as the recession of the early 1990s was taking hold.Mr. Eichner is again tackling an ambitious project at the peak of a new boom. Now, however, he believes timing is finally on his side."There are people that were doing projects when the 1987 stock-market crash hit and in 2007, when the capital markets froze, whonever came back," Mr. Eichner said. "I'm appreciative that the gods served up another chance for me."The plucky investor, who grew up in Queens and still lives in the city, is about to begin construction on his highest-profile projects in New York in nearly 30 years: a 330-foot, 670-unit rental-apartment complex on a long-vacant strip of land in East Harlem, and a pencil-thin and exorbitantly priced condo tower on East 22nd Street.Mr. Eichner faces challenges at both sites. The property at 1800 Park Ave., on East 125th Street, is one that two previous owners--including Vornado, the city's biggest landlord--could not figure out how to make profitable. The tower to go up at 45 E. 22nd St., meanwhile, rests on the premise that demand for super-high-end condos will continue to grow.Mr. Eichner has broken ground during balmy economic times in the past, only to hit calamity. This time will be different, he said, because both projects are founded on more-conservative economic assumptions that will gird him if there are bumps in the market.

Bank of China a backer

If you don't believe him, just ask his backers, he said. Bank of China is giving him a $200 million construction loan to build the first phase of 1800 Park Ave., while a package of loans and equity from Goldman Sachs, Dune Capital and investment firm Fortress is providing $420 million for 45 E. 22nd St.

"I think that a firm like Goldman Sachs has a pretty good idea of what it's doing and who it is investing in," Mr. Eichner said. "They're reasonably confident that I'm a pretty good developer or they wouldn't be investing in me."Neighborhood advocates in Harlem are hoping Mr. Eichner's past, like that of the 125th Street corridor, is not prologue. The 1800 Park Ave. site, across the street from Metro-North's elevated 125th Street station and a block from the 4, 5 and 6 subways, has been vacant for decades and is one of the neighborhood's most glaring reminders of blight."This site is a great metaphor for Bruce and for Harlem," said Deborah Wright, a former chief executive of Harlem-based Carver Federal Savings Bank. "The neighborhood has a storied history. It has had its ups and downs, and Bruce has, too."Expectations for the site also have risen and fallen. Until last year, 1800 Park Ave. had been in the hands of Vornado, the sprawling Manhattan-based real estate investment trust. When it acquired the property seven years ago, it unveiled plans to build a high-rise office building with a high-profile anchor tenant, Major League Baseball. The real estate crash of 2008 scuttled those plans, and Mr. Eichner purchased the parcel from Vornado last year for $66 million. Before Vornado, an investment group envisioned building a hotel there but never made headway."People haven't been able to figure out the neighborhood and the project that would truly fit in that location," said Blondel Pinnock, the chief lending officer at Carver Bank.But, Mr. Eichner said, the 125th Street corridor revival has kicked into high gear, especially with a Whole Foods on the way and the gut renovation and rebuilding of the 1889 Corn Exchange, across the street from 1800 Park Ave."People would have thought you lost your mind if you told them 10 years ago what Williamsburg looks like today and the kinds of rents that landlords are now charging there," Mr. Eichner said. "It's going to be the same thing in Harlem."

'I like iconic'

But he is also taking care to lessen his risk. He is building 1800 Park Ave. in two phases, the first of which will have 343 units and 87,000 square feet of retail space and cost about $306 million to construct. Only after he leases the bulk of those apartments will he begin work on a second tower, which will hold more than 300 units. He is also using Flintlock, a nonunion construction firm, to help cut his costs.

Both buildings will be 32 stories, making them the tallest in the neighborhood. Twenty percent of the units in both will be set aside as affordable housing. The first tower will be done by mid-2017. Because it's uncertain how quickly it will be leased, Mr. Eichner said, he doesn't know exactly when he would begin work on the second one."I like iconic projects where I have the opportunity to have scale," he said.Rental property in the city has leased even during downturns and is considered a less-risky venture by most developers. But 45 E. 22nd St. appears to depend on the continued strength of New York's upper-end condo market, even as thousands of competing units are set to come on line. Mr. Eichner likes his odds there, too. The tower, at nearly 780 feet, will be the tallest in the area and offer sweeping views."People are concerned about 2016 and 2017, but I'll be sold out by then," said Mr. Eichner, who is selling units as he builds the property. "At this point, I'm only worried I'm selling the apartments too quickly."

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